UK Company Tax Basics
Understand the basics of UK company tax including corporation tax, VAT and director obligations. If you are starting a company in the UK, it is important to understand the main tax obligations.
Last updated: April 7, 2024
Introduction to UK Company Taxation
Understanding UK tax obligations is crucial for any company owner. The UK tax system can be complex, but breaking it down into key areas makes it manageable. This guide covers the essential tax obligations for UK companies.
Corporation Tax
Corporation Tax is the main tax paid by UK companies on their profits. The current main rate for larger companies is 25%, while smaller companies benefit from lower rates.
You'll need to file a Corporation Tax return with HMRC each year, typically within 12 months of your accounting period end. Your tax is due nine months after the accounting period ends.
Value Added Tax (VAT)
VAT is a tax added to the sale of goods and services. If your company's turnover exceeds £85,000 per year, you must register for VAT. This involves charging VAT to customers and paying it to HMRC.
Many businesses find VAT advantageous because you can reclaim VAT paid on business expenses, offsetting the VAT you owe.
PAYE and Employees
If you employ staff, you must operate a PAYE (Pay As You Earn) scheme. This involves calculating and deducting income tax and National Insurance contributions from employee wages.
PAYE is managed through RTI (Real Time Information) returns submitted to HMRC when you pay employees.
Dividends and Personal Tax
If you're a shareholder, any dividends you receive are subject to dividend tax. However, you benefit from a dividend allowance each year before tax applies.
Key Compliance Deadlines
- Corporation Tax Return: 12 months after accounting period end
- Corporation Tax Payment: 9 months and 1 day after accounting period end
- Accounts Filing: 9 months after accounting period end
- PAYE Returns: Monthly (RTI)
- Annual PAYE/NI: May following the tax year
Getting Professional Help
Tax can be complicated, and making mistakes can be costly. We recommend working with an accountant or tax professional who understands UK company taxation. Our team can connect you with trusted professionals or help with tax planning strategies.